Pitch Deck: How To Create The Perfect Funding Proposal

Pitch Deck: How To Create The Perfect Funding Proposal

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Your pitch deck is kind of important – after all, it captures your rationale for why people should invest in your idea and give you a lot of money. Maybe millions.

So your sales pitch, and supporting pitchdeck, better nail it.

But for every venture capitalist or angel investor out there, there is a different opinion on exactly how to approach the pitch deck. 6 slides? 10 slides? 15 slides? No slides, just a killer demo?

I have never seen a presentation that has too few slides, too big a font, and too little graphics.

Guy Kawasaki

Venture Capitalist

You can explain your business in mind numbing detail or you can inspire an investor and let them imagine. Guess what works better? When you sit down and build your pitch deck, think of six slides that will inspire and leave something for the imagination.

Fred Wilson

Venture Capitalist

The most fundamental strategy of a start-up is the financing strategy. If your company runs out of finance it will close no matter how good the product strategy is.

Reid Hoffman

Entrepreneur, Venture Capitalist

[A ten section] business plan format, within 15–20 slides, is all that’s needed.

Sequoia Capital

Venture Capitalists

In this post we provide the authoritative consensus on the slides you need in your fundraising presentation.

We have looked at what the world’s most influential venture capitalists, entrepreneurs and angel investors, including Guy Kawasaki, Reid Hoffman, Fred Wilson, Brad Feld, Mark Suster and Dave McClure, look for in a pitch deck. We have then summarized that advice into an easy to follow plan.

What is a pitch deck?

A pitch deck is a brief, written presentation that supports your oral, fundraising sales presentation. The objective of the pitch deck it to concisely layout the rationale for investing in your business.

After canvassing leading entrepreneurs and investors, the consensus set of pitch deck slides are:

Company Purpose (The Title slide)

The Problem

The Solution (and your Demo)

The Market

The Competition

The Value Proposition

The Business & Revenue Model

The Team

The Financials

Current Status & Use of Funds

In the rest of this article we explore each of these slides in detail, providing advice and examples of what to include, and what not to.

We also look at how your pitch approach must change depending on what stage your idea or company is at. We discuss pitch requirements for seed pitches, series A and B pitches, and IPO roadshow decks.

When do you need a pitch deck?

A pitch deck lets you present your business plan to potential investors when new funding is needed to develop the business.

You don’t need a pitch deck to attract funding if your business is successful, growing organically and at the right level and scale for the market and your ambitions.

What are you trying to achieve with your pitch deck?

Your goal is to persuade investors to put money into your business, to fund your business’s growth. The funds are used to push your business to the next stage of its development.

Pitch decks are the tool to convince investors of the merits of funding your business.

Who is your audience and what are their questions?

The classic partner in a VC firm is exposed to 5,000 pitches in a single year.

Reid Hoffman

Determining the question in the mind of the audience that you are there to answer, and then

Structuring a clear answer to that question

Your pitch deck audience is investors (VCs, angels) and their question is ‘Why is this company worth investing in?’

While this may seem obvious (it is), a surprising number of pitches can lose sight of this fundamental question. Focus on answering this exam question.

It is worth noting that fundraising from angels and venture capitalists is tough.

Competition is fierce:VCs are exposed to thousands of pitches a year, and may only make a few investments.

Venture Capitalists are looking for significant returns:Because start-up investing is risky (90% of investments fail), VCs must compensate for these losses with a few big wins. As a consequence, venture capitalists are looking for investments that have the potential to return at least 10x the initial investment.

Venture Capitalists specialize:VCs tend to specialize in particular areas where they either have expertise or a strong investment thesis.

As a consequence, fit between investor and start-up is critical. Look for quality over quantity of investors. Research your target investor and see if they invest in the sector you are in or the stage of company you are at. Tailor your story to the particular investment theses or sector focus of the VC you are speaking to. Research past investments to understand what ideas resonate with your audience.

Michael Wolfe says you must get across how “this company is going to become more valuable in the future.”

As Reid Hoffmann explains, when pitching LinkedIn, “My strategy was to steer immediately into the revenue question because that was investors’ biggest concern in 2004.”

Who is your audience and what are their questions?

Research from Professor Tom Eisenmann from the Harvard Business School for Docsend looked at the fundraising of 200 start-ups as they went through the seed and series A funding process, raising over $360 million.

It found that:

The financial and team slides were viewed the most and longest at 23.3 and 22.8 seconds each on average

The problem and solution pages were viewed for the least length of time at 11.3 and 10.6 seconds

Avoid listing deal terms and funding information in your deck, instead deliver them in person (they will vary for each investor)

Seed, Series A, Series B and IPO Fundraising Rounds

Michael Wolfe puts it best when he states: “The pitch deck you used for a seed round will not be what you need for series A or B pitches. Your business will have changed, the market too and what you want to get out of the investor meetings.”

Broadly speaking, there are four types of pitches related to businesses at different stages of development.

1. The ‘Seed Round’ pitch deck

A seed-round pitch deck is a pitch for initial funding from investors. The seed investment round can often come before you have a product for sale or any revenue. The focus of the pitch is typically on the problem being solved, the size and potential of the market, and how compelling the solution and business model is.

Seed investors are typically small venture capital funds that give between $250k – $1m. Angel investors, wealthy individuals investing their money directly, are also an important source of capital at this stage of fundraising.

There are important differences between these two sets of audiences, and as a consequence, what they are looking for from a pitch.

Angel investors typically invest, in aggregate, substantially less than VCs (even micro-VCs specializing on seed rounds). As a consequence they are likely to take more of a personal interest in the founders and the business and be in a position to offer a more hands on role in advising the company. But they will be unlikely to invest in follow-on rounds due to their capital constraints. Their focus is typically on understanding the entrepreneurs vision for the product and commercial opportunity.

The biggest mistake presenters make is that they think that they are so interesting and have so much to say that they are the exception to the ‘less is more’ theory of presentations

Guy Kawasaki

Venture Capitalist

2. The ‘Series A Round’ pitch deck

With a Series A funding round, the business has typically figured out product/market fit and are now looking for money to

Figure out or scale distribution,

Master a revenue or business model, or

Adapt a business model to new markets

As a consequence of this change in objective, the focus of the Series A pitch deck changes as well. The pitch deck must:

Demonstrate how the product fits into a market

Show investors how funds will enable the company to master a business model, or

Show investors how more funds will lead to more customers, quicker

The investor profile may change in this round. Some investors specialize in follow-on rounds, others in very early stage investments. Do your research and tailor your story to the questions the prospective investor will prioritize.

3. The ‘Series B Round’ pitch deck

A Series B pitch deck focuses on scaling the business. You have a user base, customers and growing revenue helped by earlier funding. New funds are used to scale the business model, make further acquisitions and invest in key capabilities.

The focus shifts from describing the vision and concept to providing evidence that you have a viable business

The pitch should include details of what you have achieved with funding from earlier investment rounds

It should offer a more mature view of the market, revenue model and competition

The focus should be on sustainable growth models that drive scale

4. The ‘IPO’ Roadshow Document

Series C pitch decks and on-wards, including IPO roadshow decks, seek funding to expand, often into new geographies or adjacent markets.

At this stage the company has been very successful and has proven its viability

The IPO process is usually managed by investment banks, who will develop extensive material to support the investment process

IPO decks tend to be a longer and contain significantly more financial detail

The Perfect Pitch Deck: The Consensus View

Based on the research we have conducted looking at articles from top VCs and entrepreneurs such as Dave McClure, Brad Feld, Guy Kawasaki, Fred Wilson, Mark Suster and Michael Wolfe, these are the 10 slides you need.

The optimum time for a pitch, according to Kawasaki and Suster, is 20 minutes.

If your business has certain problems that, at this stage of its development, are still awaiting answers – confront them head on. Address these issues directly because you can be sure your potential investors will.

The best pitch is a conversation. It should be cohesive, tell a story and explain a trend.

Mark Suster

Slide 1: Company Purpose

Cover slide. A title slide. A teaser slide. Whatever you call it, you need to start somewhere. And it makes sense to start with who you are.

Ideally you want to define the company in a single declarative sentence. Define, succinctly, what the company does or aspires to do.

As Michael Wolfe says “starting with a brief snapshot helps ground people and head off questions.”

And make it memorable. Show the vision of the business.

Reid Hoffman thinks the first 60 seconds of your pitch are the most crucial, so how you begin is incredibly important.

Brad Feld believes all entrepreneurs should have a variety of verbal pitches to use in different situations. A 15 second, three sentence overview should be ‘very tight but get me interested in you.’ This is the verbal voice-over for this slide.

In 60 second verbal pitch version should be able to show “what you do, who you do it to and why I should care.”

The 5-minute pitch should lead with the 60 seconds, “then go deeper.” A 15-minute pitch will be a full, high-level pitch and at 30 minutes it will be an extended pitch deck presentation with more detail.

You are obviously also going to need the name of your company, a logo and the names of the presenters. Consider adding a line about the purpose of the presentation along the lines of ‘Investor Presentation to Sand Hill Road VC’. This is a small (very small) signal that you have tailored your pitch to the audience (always a good thing).

Objective: To give VCs a taste of your business and provide contact information for them to follow up

Include: Company name, your name and title, address, email and mobile phone number

Common mistakes:Including too much information that is difficult to take in and also steals the thunder of later slides.

Slide 3: The Solution (and your Demo)

A great demo in the middle of a presentation is the best-case scenario. A picture is worth a thousand words, but a demo is worth a thousand slides.

Guy Kawasaki

Venture Capitalist

After defining well the problem that must be solved, this section of the pitch deck describes how your business solves that problem. This is where you show your product and highlight its uniqueness. Where possible, show a live demo, use screenshots, animation or video to show your solution in action.

The Demo

Nearly all our experts stress the importance of demoing the product at this point in the pitch. Brad Fled states, “I don’t want to hear you describe what you are going to do, I want to see it. Or – if it’s not built yet, see an example of it.”

Guy Kawasaki’s advice “is to provide just enough information to make people want to watch a demo.”

This allows VCs to come to their own conclusions about the product.

Objective:To show your audience your compelling solution to an important problem.

Common mistake:Telling your audience what the solution is rather than showing them.

Include:An example, images and a demonstration of what your product does. Highlight the benefits to your customers.

Example: In Reid Hoffman’s LinkedIn Series B pitch he uses a slide to illustrate how his solution is version 2.0 compared to what went before it, introducing the concept of networks over 1.0 flat directory solutions.

Slide 6: The Value Proposition

This slide is a natural build on the earlier solution slide. This is the opportunity to elaborate on the product and frame it in the way it would be marketed to customers.

A value proposition positions the product or service and illustrates what benefit it provides. As Guy Kawasaki describes, you want to communicate ‘the secret ingredient’ that makes your product unique from all other potential solutions.

This is also the section of the pitch where you can go into more detail on the product line-up, including expanding on form factor, functionality, features, product architecture, and intellectual property ownership. If additional development work is required to complete the product you should include a development roadmap as well.

Objective: To show how your product solves customers’ problems or improves their situation, how it delivers specific benefits and tells the ideal customer why they should buy from you and not others.

Common mistakes: Some pitches ignore this element or don’t understand what they should say. It needs to show how your solution will resonate with customers.

Include: Talk about benefits, not features. Show what type of product you are selling, include further information on the potential returns for investors.

This slide could also include information on how you can monetize the product. It should illustrate why a customer should buy the product.

Slide 7: The Business & Revenue Model

The Business & Revenue Model slide focuses on how the business will make money.

You should cover things like:

Revenue model and pricing

Sales and distribution model (how will customers find you)

Customer acquisition costs, average account lifetime value

Customer/pipeline list

Barriers to entry:

Michael Wolfe says: “Investors know that customer acquisition is where most startups fall down. Devote a few slides to the topic.”

According to Guy Kawasaki, in many cases “the best way to illustrate a revenue model is to make such a compelling demo that the audience can fill in the blanks for itself on who, when, and why people will pay,”.

Include 1-3 revenue streams. Reid Hoffman included three for LinkedIn, targeted ad’s listings and subscriptions, but admits this was unusual. He says, “The general rule is one business model drives the business. The charitable interpretation, which was true in our case, is that the company’s team doesn’t know which one model will work. The bad interpretation is that the team lacks focus and doesn’t understand that they generally need to drive to one business model to succeed.”

Objective: To present how you will make money for your company and the investors.

Common mistakes: Many investors focus too much on the problem and not enough on customers and the business model.

Include: Information on pricing, how you are going to attract and retain customers, customer numbers and what they are spending.

Slide 8: The Team

Team can be crucial. In fact in some instances, with repeat entrepreneurs, it is the team that is funded, rather than the idea.

Generally, the goal here is to show that the team has the requisite experience to suggest they know what they are doing. If there are any parts (skill sets) of the management team that are missing, be sure to articulate a plan for filling those gaps.

Don’t bring more than three people to the pitch. Mark Suster suggests you split the presentation 65:35 or 50:25:25 if you have three people. The CEO should act as the quarterback for the presentation and questions.

Objective: To demonstrate that the team has that necessary skills that build and manage the business.

Common mistakes: At an actual presentation, if you bring and introduce key members of your management team, be sure to utilize them, otherwise investors will question why they are there.

Include: Introduce the key members of your team, briefly outline their role and how they add value to the business. Introduce other investors and a board of directors if you have them.

Slide 10: Current Status & Use of Funds

This should show how far you have come on your journey, what the company has achieved, and how investment funds have been used so far.

You should explain what funds you now require, what you plan to spend the money on and the key milestones you intend to hit with the next round of funding.

Suster thinks an exit slide is vital, one that “plants a seed for selling the company in the future.”

This slide should introduce your funding status, what you need for the business, who is currently funding it and ideas on future funding.

Hoffman notes that you may not want an appendix but in preparation of investor questions, “preparing appendix slides with structured answers is impressive, showing that you’ve considered all of your business’ challenges, opportunities, and comparisons.”

Objective: To leave your audience confident that you know why you are raising funds, and that you know how to deploy them efficiently and effectively.

Include: A summary of what has happened so far, key milestones, funding requirement and proof of the positive use of funds so far and an idea of what is expected to happen in the near future.

Summary

The ultimate pitch deck needs an immediate hook to attract investors’ attention, it needs to articulate a vision and clearly explain the problem that your business is solving.

It needs to answer the question ‘why now?’ and, in a compelling way, convince your audience that your product or service solves a problem a significant number of people are willing to pay to have solved.

It must present a model that shows how the business can scale rapidly and become profitable.

In almost all cases a live demo is needed to show your audience your product.

The perfect pitch deck contains the following ten sections:

Company Purpose (The Title slide): Your single sentence distillation of your company and vision

The Problem: What customer (or customer’s customer) problem are you solving?

The Solution (and your Demo): What is your innovative, better solution to this problem?

The Market: How big is the market?

The Competition: Who are you competing against and how are you better?

The Value Proposition: How is your product or service positioned to customers?

The Business & Revenue Model: How will you make money

The Team: Why will this team be successful executing on this vision?

The Financials: What kind of return on investment are we expecting?

Current Status & Use of Funds: How will the investment be used?

The pitch should ideally take around 20 minutes, so it’s not rushed and there is time for questions.

LinkedIn: A Case Study

When Reid Hoffman, one of the founders of LinkedIn, pitched LinkedIn to Greylock Partners for a Series B investment back in 2004, he used the pitch deck above. Hoffman provides a fantastic retrospective review of this 2004 deck here.

Three Key Challenges

At the time, Hoffman had to address three main challenges. The company was not a market leader, it had no revenue and no substantial organic growth.

He was also pitching in a very difficult market climate. Many investors had recently made mistakes investing in the dotcom bubble, so they were increasingly conservative and very focused on paths to revenue.

Hoffman explains how LinkedIn’s financing played out. “The Series A was a concept pitch for building the network. The Series B was a concept pitch for getting to revenue. The Series C had to be a data pitch that showed either how we could get to profitability or that we were profitable. And Series D ended up being ‘We can scale to a big opportunity’.”

However, with no clear revenue growth, he had to convince investors that building the network, in LinkedIn’s case, comes first, then the revenue.

Hoffman took on the revenue question head-on, knowing it was a topic likely to be picked over by investors.

The Problem and Solution

Hoffman identified the problem that LinkedIn was trying to solve; there was no effective, trusted way for professionals to find and transact with each other online.

The solution was to position LinkedIn as a network all professionals could be a part of, creating a reputation that would encourage trust fostering growth.

Pitching by Analogy

Hoffman showed rather than told investors the value proposition. According to Hoffman, “The winning moment for an entrepreneur is when an investor concludes on their own volition that an investment thesis is worthwhile.”

Hoffman used Monster and LexisNexis to show how LinkedIn could become more than the sum of those parts, how it could become a network rather than just a resume database.

Ending With a Single Sentence Summary

At the end of the pitch, LinkedIn left up a slide that encapsulated its value whilst taking questions. The slide said: ‘Find and contact the people you need through the people you already trust’.

Hoffman said: “End on a slide that you want people to be paying attention to. The final slide should serve to remind investors why they should invest in your company.”